California Reinvestment Coalition Sues HUD Over Stalled FOIA Request


San Francisco, CA- Oct 6, 2015—Last week, the California Reinvestment Coalition (CRC) filed a lawsuit in federal court against the US Department of Housing and Urban Development (HUD), challenging HUD’s denial of a fee waiver for a Freedom of Information Act (FOIA) request. CRC submitted the FOIA request to better understand HUD’s role in overseeing the reverse mortgage industry, the national impact of foreclosures on widowed seniors due to reverse mortgages, HUD’s response to these foreclosures, and the track record of OneWest Bank and its reverse mortgage subsidiary, Financial Freedom.

Given the number of aging Americans who could be impacted by this problem, CRC believed its FOIA request met the “public interest” requirement to seek a FOIA fee waiver and requested the waiver from HUD. However, HUD denied the fee waiver and an appeal.

So-called “widow foreclosures” happen because unscrupulous mortgage brokers originated reverse mortgages to only one spouse- often leaving the younger spouse off the mortgage. If the borrowing spouse later died, banks and servicers can foreclose on the non-borrowing spouse- something most couples didn’t contemplate happening when the loan was originated. As the overseer of the reverse mortgage industry, HUD allowed these foreclosures to happen until it was sued and a federal judge ordered it to create a new policy for these homeowners. Kevin Stein, associate director at CRC, explains: “We filed our FOIA request in 2014 after being contacted by affected widows and advocates in the context of our protest against the merger of OneWest Bank with CIT Group. We heard a number of troubling stories about widowed homeowners being foreclosed on by Financial Freedom.Given the national implications of this problem, we requested data from HUD on the number of people impacted and HUD’s process for designing a new policy. We also asked HUD for data on Financial Freedom foreclosures and complaints so that the public and bank regulators could better evaluate OneWest’s track record as part its merger application. We are hopeful this lawsuit will be resolved quickly so the fee waiver is granted, the data we seek in our FOIA request is produced by HUD and the public is granted access to this important information.”
CRC’s FOIA request to HUD asks for:

1. The number of reverse mortgage foreclosures nationally, since 2009, including foreclosures on non-borrowing, surviving spouses (aka “widow foreclosures”).
2. The number of reverse mortgage foreclosures by OneWest Bank/Financial Freedom on borrowers and on non-borrowing, surviving spouses (aka “widow foreclosures”).
3. The number, types, and resolution of complaints filed with HUD against OneWest Bank and Financial Freedom since 2009.
4. Information on HUD’s process to create a new policy to address “widow foreclosures.”
5. The number of non-borrowing spouses who could potentially face foreclosure because of a reverse mortgage originated solely to their spouse

Additional Background:
Lawsuit: CRC is represented on a pro-bono basis by Matthew K Edling, an attorney with Cotchett, Pitre, &McCarthy.
FOIA Request: CRC originally submitted its FOIA request in November 2014. CRC believed the request met the“public interest” requirement for a fee waiver, and requested the waiver.

The four requirements for a fee waiver under the “public interest” requirement include:
1) whether the subject matter specifically relates to the operations or activities of the government; 2) whether the requested documents will likely contribute to an understanding of specific government activities or operations;
3) whether the disclosure will contribute to a greater understanding on the part of the public at large; and
4) whether disclosure will contribute significantly to the public understanding of government activities or operations.

HUD denied the fee waiver request in December 2014 for failing to satisfy the public interest requirement. An appeal by CRC was also denied by HUD in March 2015.

CRC’s requests for a fee waiver on other FOIA requests have been granted by other agencies like the FDIC.

Widow Foreclosures: After lawsuits (Bennet v. Donovan and Plukett v. Donovan) brought by AARP and the law firm of Mehri & Skalet, a federal judge ordered HUD to revise its policies in order to address the “widows foreclosure” problem. HUD announced a new policy in January 2015. However, the new policy was widely criticized by advocates, and HUD later rescinded the policy. A few months later, HUD announced a new policy(HUD Mortgage Letter 2015-15). Under the new policy, reverse mortgage servicers have the option (but are not required) to allow non-borrowing surviving spouses to remain in their homes after the death of their spouse who was the only person listed on the reverse mortgage.

Financial Freedom: At a February 2015 Federal Reserve/OCC hearing, a number of widows and their family members testified about Financial Freedom and the many difficulties they faced when trying to seek a resolution other than foreclosure. On July 21, 2015, the Office of the Comptroller of the Currency (OCC) gave conditional approval to the merger of CIT Group and OneWest Bank (owner of Financial Freedom). The approval is conditioned on the bank submitting a comprehensive business plan to the OCC as well as revising its Community Reinvestment Act plan.